Peace Corps

Office of Inspector General

Port Vila, Vanuatu

Flag of Vanuatu

Advice and Assistance:

Peace Corps/Vanuatu
May 2010

Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu

 • Documentation used to support the claim for reimbursement only included an invoice
from a travel agent and did not include an airline ticket receipt.

On March 11, 2009, the PCMO provided a sworn statement to the OIG admitting to a claim for
reimbursement she knew to be false with the intent to fraudulently obtain money from the U. S.
Government. The PCMO’s contract was subsequently terminated.

Additional Request for Audit Support

As a result of the of the allegation of potential travel reimbursement fraud, the Office of Global
Accounts Payable, IAP Regional Office, and PC/Vanuatu requested additional advice and
assistance to review other PC/Vanuatu operations to determine whether the fraudulent activity
substantiated by our OIG special agent was an isolated incident or whether there were other post
operations vulnerable to fraud, waste, or abuse. Our audit unit performed additional advisory
work at PC/Vanuatu from April 21 – May 13, 2009.

Scope of Review

Our scope of review was limited to post operations involving the former PCMO. The specific
areas reviewed were selected because of their high risk for additional fraud, waste or abuse that
may have been committed by the former PCMO. Additionally, we reviewed other functional
areas of concern to IAP management and PC/Vanuatu. The following areas were reviewed:

1. A review of the former PCMO’s contractual relationship with the Peace Corps. This
review included all contract payments, benefits, allowances, time and attendance, and
travel claims.
2. Medical service and supply vendor payments
3. Medical Inventory Control
4. Local Medical Supply Procurements
5. International Travel
6. Vehicle Maintenance Expenditures
7. Fuel Purchases
8. Vehicle Disposal
9. Property
10. Financial Management

Results of Review
Post Area of Concern Audit Procedures
1. PCMO Contract Examined contract
payments
Finding(s)
1.1. Former PCMO’s
personal business license
fees were authorized under
the contract. License fees
were not required for the

Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu

 former PCMO to work for
the PC.
License fees should not have
been allowed.

1.1 Recommendation: None.

Country director took action
to disallow these types of
expenses in the future.

Examined Salary and 1.2. Contract allowed for

benefits allowed under the unusual payments including
contract “home leave” although the
PCMO was permanent
resident of Vanuatu. Home
leave travel amounted to a
free paid vacation, including
travel expenses.

1.2 Recommendation: None.

Country director took action
to disallow future
unallowable contract cost.

1.3 Former PCMO salary

appeared too high for
market conditions. Former
PCMO was allowed to set
own salary rates. Salary
level was accepted
contractually without
independent verification of
the local labor market.

1.3 Recommendation: None.

Former PCMO contract was
terminated. See
Background section.

Reviewed Time & 1.4 Former PCMO’s time

Attendance and attendance while “on-
call” was questionable.
Allegation received that the
former PCMO claimed time
spent while “on call” after
duty hours and weekends

Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu


2. Medical Supply Vendors
Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu
was inflated. We were
unable to substantiate the
allegation.
1.4 Recommendation: That
the country director monitor
future time and attendance
claims for staff working “on-
call” to minimize the
opportunity for abuse.
Reviewed former PCMO 1.5 Payments for health
benefits. benefits were not supported
by an actual insurance
policy. Insurance provider
refused to provide proof of
policy. This allegation was
not pursued since the PCMO
contract was terminated.
1.5 Recommendation: None.
Former PCMO contract was
terminated. See background
section.
Reviewed MOUs with local 2.1 Former PCMO
medical suppliers authorization to obtain
goods and services from
local medical suppliers on
behalf of the Peace Corps
had not been revoked after
the PCMO’s contract was
terminated.
2.1 Recommendation: None.
Country director took
immediate action to notify
local medical suppliers to
revoke the former PCMO’s
procurement authority on
behalf of Peace Corps.
Reviewed local procurement 2.2 Separation of duties in
procedures the ordering, approval and
payment for medical

3. Medical Supply Inventory
Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu
supplies and drugs was
inadequate.
2.2 Recommendation: That
the country director
implement procedures to
ensure that there is sufficient
internal control in the
ordering, receiving,
dispensing, recording, and
payment of medical supplies
and drugs.
2.3 A majority of medical
purchases were local
procurements and therefore
more expensive.
2.3 Recommendation: That
the post procure supplies
and drugs through Peace
Corps Headquarters and
limit local procurement to
emergency or time sensitive
needs.
Reviewed inventory control 3.1 Poor control over
procedures medical supplies. Former
PCMO dispensed drugs and
supplies without recording
in the medical records. No
assurance that inventory
supplies were not embezzled.
Records were too incomplete
to definitively determine the
loss of inventory.
3.1 Recommendation: None.
The PC/Vanuatu country
director had recently
implemented PCM section
734 to strengthen internal
control over medical
supplies after termination of
the former PCMO.
4. Laboratory Billings Reviewed payment vouchers 4.1 Poor internal control in
for medical testing services the procurement of
laboratory and other
medical testing services.

-Post paid for unallowable

medical laboratory services
on behalf of a staff member
and a local national not
affiliated with the Peace
Corps.

-Medical payment records

were incomplete and not
attributed to a particular
patient. More questionable
charges could exist but were
too difficult to document due
to the poor recordkeeping.
Current PCMO stated the
possibility of other
unauthorized lab tests paid
for by the Peace Corps.

4.1 Recommendation: That

the country director monitor
payments for laboratory
testing services to identify
and prevent payment of
unauthorized medical
expenses.

5. Vehicle Disposal Reviewed vehicle auction 5.1 Possible bid rigging

procedures and occurred in the sale of used
documentation PC vehicle by auction. We
identified irregularities in
the auction process. PC
personal service contractor
obtained the vehicle for
$8000 and resold the vehicle
for $20,000.

5.1 Recommendation:
Matter was referred to OIG
Criminal Investigations Unit
for further investigation.

Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu

 Results of investigation were
issued in a separate report.
Additionally, headquarters
took action to strengthen
vehicle auction procedures
to disallow the sale of
vehicles to PC staff and
contractors.

6. Property Reviewed property 6.1. No property inventory

inventory control controls were in place due to
procedures the physical move of the post
to new office space.

6.1 Recommendation: That

the post perform a complete
top to bottom physical
inventory of property to
establish a new baseline of
post property inventory.

6.2 Recommendation: That

the post implement
procedures to ensure that
post property inventory
records remain accurate.

7. International Travel Reviewed travel vouchers 7.1 Several travel vouchers

for international travel lacked receipt from an
airline for transportation.
Vouchers were processed
with invoices from a travel
agent. This area was
vulnerable to fraud. (See
background section).

7.1 Recommendation: None.

Country director had
already taken action to
strengthen control over
international travel
payments.

8. Physical Security Reviewed physical security 8.1 Observed office space

doors unlocked at night
increasing the risk of loss

Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu


9. Financial Management
10. Vehicle Maintenance
Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu
Review of administrative
unit procedures
Reviewed vehicle fuel usage
logs and vehicle
maintenance records
from theft. No onsite
security.
8.1 Recommendation: That
the post needs to establish
physical security policies
and procedures for their
new office space to prevent
loss of property or damage
to the PC office, and to
provide safety and security
to PC staff and Volunteers.
9.1 Post lacked leadership in
the Administrative Unit. As
a result, internal control was
non-existent. For example:
We noted payments made
without adequate supporting
documentation, which
Increases risk for fraud,
waste, abuse and
mismanagement.
9.1 Recommendation: None.
Country director took action
to replace the administrative
officer to improve leadership
and strengthen overall
administrative management.
10.1 Fuel records were
incomplete and fuel usage
was not supported by vehicle
usage. As a result, fuel was
vulnerable to theft and
misuse.
10.2 Vehicle maintenance
and repairs were not
competitively procured.
10.1 Recommendation:
None. Country director
took action to eliminate post
fuel storage and require fuel
 to be purchased from a local
filling station and require
receipts for fuel purchases.

10.2 Recommendation: That

the post obtain multiple
vendor estimates for repairs
when possible in order to
obtain the least cost to
repair or maintain PC/
Vanuatu vehicles.

Conclusion

Overall we found that Peace Corps/Vanuatu’s financial and administrative operations and its
compliance with agency policies and federal regulations required improvement. We noted
deficiencies in three of the five internal control standards of the Government Accountability
Office: standards requiring a control environment, control activities, and effective monitoring.
The internal control deficiencies occurred in large part because of inadequate oversight by
former post management and staff and were an underlying cause for many findings in the report.

OIG Post Recognition

We recognize the superb efforts of the post to identify and report suspected fraud, waste, abuse
and mismanagement. The current country director is credited for identifying and taking quick
corrective actions on many of the post’s deficiencies in this report. Additionally, the country
director is credited with the identification of potential fraud, waste, abuse and mismanagement.

Management Comments on Advice and Assistance

This memorandum report is advisory and is provided for management’s use and information.
The results of our review were communicated to both PC/Vanuatu and regional management in
May 2009. Therefore, it is our opinion that adequate timely corrective actions have been taken to
remediate most of the issues identified during our audit visit, and no additional formal comments
from management are required.

Report Distribution

Country Director, PC/Vanuatu

Acting Director, Office of Global Accounts Payable
General Counsel
Director, Office of Medical Services

Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu

Chief Financial Officer

REPORT FRAUD, WASTE, ABUSE,

AND MISMANAGEMENT

Fraud, waste, abuse, and mismanagement in government affect

everyone from Peace Corps Volunteers to agency employees to
the general public. We actively solicit allegations of inefficient
and wasteful practices, fraud, abuse, and mismanagement related
to Peace Corps operations domestically or abroad. You can
report allegations to us in several ways, and you may remain
anonymous.

Memorandum Report – Advice and Assistance – Peace Corps/Vanuatu